How the FEHB Program Works

The Federal Employees Health Benefits Program (FEHB) is an unconventional government program. Instead of giving you one "take it or leave it" choice, the government authorizes plans to compete for your premium dollar. It pays most of the premium cost—up to 75 percent for annuitants and most employees—and even more for Postal employees and employees of some other agencies, such as the FDIC and SEC. Considering tax advantages, the government pays between 80 and 90 percent of premium costs for most plans for employees (but not retirees). Nationally, about 280 plan options are offered, with almost all employees and retirees eligible to join 20 or more. You decide which plan you want to join. If you are not satisfied, you can switch in the next Open Season.

The FEHB program enrolls about 8 million persons. Enrollees spend about $50 billion a year through their health plans. About five percent of enrollees switch among plans in Open Season, based on past trends. Until the Medicare Advantage program, which was modeled on the FEHB program, it was the largest "managed competition" system for harnessing consumer choices to contain health insurance costs. Studies have shown that it outperforms both Medicare and private employer plans in coverage, cost control, and consumer satisfaction.

OPM sets minimum financial, administrative, and benefit terms and conditions for every plan participating in the program. Insurance companies and OPM agree each year on contracts setting forth both benefits and costs. A few key points about the FEHB program:

All employees and annuitants can enroll in whatever plan they choose, or not enroll at all.

Everyone can change plans once per year in Open Season. You also may switch plans or options in circumstances such as marriage, birth of a child, or geographic transfer. If you belong to an HMO and move out of its service area, you may enroll in a new plan.

A family or self plus one enrollment covers only immediate family members: your spouse and children. Coverage for children now lasts until they reach age 26, unless they are severely handicapped. In that case they may be eligible at any age.

Plans cannot exclude coverage for any preexisting conditions or illnesses your family may have when you switch plans. You may switch to gain the best coverage for your condition and use the new plan without penalty.

Plans must publish brochures in a common format that provides a clear explanation of their benefits and your cost for covered services, how you access plan services, how you get approvals, and your rights in disputes.

Each plan must pay for the medical and related costs as explained in its brochureâ€”no more and no less. If a brochure says that a category of service is limited or excluded, believe it.

Plan brochures may explain the same benefit differently. Sometimes the wording used is not clear to a layperson. However, you can often figure out what specific benefit language really means by comparing two or three brochures to see how they differ.